I've got an opportunity to pick up a property for just below appraisal. It lies in the FEMA flood plain. It could possibly work as a flip but am consented about being able to sell it. Could get into it cheap for a buy and hold but flood insurance will eat up cash flow. Advice?
You can't get away from that flood insurance and it seems like a lot of people are thinking that it is only going to go up too. I have picked up a number of properties that are in the flood zones and have been able to sell them wholesale decently well. There are definitely a number of factors to take into consideration though. A big one is how many times has the house flooded? For example, there are a lot of homes out there that have flooded 2-4 times in the last few storms in the Houston area. These house are worth less than a house that flooded for the first time in Hurricane Harvey. This one was unusual. If it is borderline on cashflow as a rental, then I would probably push more towards doing it as a flip. People are still purchasing houses in the flood plains because they like the location. I would probably recommend making sure that it is still a good deal if you aren't able to sell it at what you would consider full market value.
It all depends on which zone the property is in. I've never been comfortable with properties in the 100 year flood zone. Those are almost guaranteed to flood if we have a major rain event. And we've had several in the last few years.
I'm much more comfortable with the 500 year zone. Those homes are less likely to flood and the insurance is a lot cheaper. I'm looking at a house now that's in a 500 year zone. It didn't flood during Harvey, but took in 4 inches of water during the Tax Day Flood in 2016.
Thanks guys! This property is about 60 yards from a city creek and has never flooded. Noah would be alerted in the event it came close, but it is zoned and therefore forces owner tic buy the ins.
A couple things to note on the Flood Insurance:
1. there are now private (non-FEMA) flood policies available so be sure to have that quoted also as it may save money.
2. The National Flood Insurance Program (NFIP) has different rules and rates based on when the bldg. was built vs. the year the town became part of the flood program (date of first flood map). The pre-flood map (PRE-FIRM) buildings were not rated based on the properties actual elevation compared to the flood plain. That is changing. If you get an "elevation certificate" from a surveyor, you have the option to use your actual elevation if it saves you. If you are getting a survey of the property done you can probably get the elevation cert cheaper since the surveyor is there already.
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